Spotting Breakouts Fast Is A Key To Investing Success
How do you quickly spot growth stocks with bullish characteristics and poised to break out? First begin with IBD Leaderboard and the Stocks On The Move screen on Investors.com to find high-quality names that are surpassing correct buy points. Then add to your watch list by going through IBD's research-driven stock screens. (© David San Segundo/stock.adobe.com)
An old saying that IBD founder William O'Neil likes to use is this: "If you snooze you lose."
Nowhere in investing is that more true than when a stock breaks out of a base. To be successful at the game, you've got to move fast. You've got to pull the trigger quickly.
Breakouts can happen with lightning speed. A stock can be outside the 5% buy zone in a number of minutes. The terrible irony for the investor who contemplates too long is that the stocks that move the fastest on the breakout on volume that is the most furious are the ones that go the greatest distance.
Buying as close to the buy point as possible also reduces risk. The investor who buys right can often get out of a failing breakout at break-even or with a small gain, or he can easily sit through a normal pullback.
So how can IBD help you spot breakouts quickly? There are a number of places you should look regularly, maybe more than once a day.
But before we list these features, it is important to stress that investors should be familiar with these stocks before they buy. A broad knowledge of the leading stocks is vital to avoid mistakes. What industry group is it in? Does it have sufficient trading volume? Does it have top mutual funds as investors? Those facts should all be known before the stock breaks out.
One place you should look is the "Stocks on the Move" feature on IBD's home page. It lists growth stocks moving higher in volume significantly above average. Take a quick look at the chart of each stock to see if it's breaking out. Or, maybe it's about to break out and is already showing good upside volume.
Then, check out the various screens nested underneath "Stock Lists" on the Investors.com home page, including the IBD 50, Sector Leaders, Stock Spotlight, the IBD Big Cap 20 and new highs. Often, the stocks on the list are breaking out. They might be building the right side of a base. If so, you might have a new name for your watch list.
Stay on top of IBD's weekly earnings calendar, seen in the latest IBD Weekly print edition on page B2. Breakouts often occur when a company issues a better-than-expected quarterly report. So check the list for top-rated stocks about to report earnings. If it's set up in a base, be ready when earnings are reported.
Leaderboard, a watch list of hand-picked growth stocks with outstanding fundamental and technical characteristics, also highlights the chart action of top stocks.
Finally, MarketSmith, a charting service now part of the IBD suite of products, offers alerts that can be received by email or as a text message on your cellphone. You can set alerts if your stock hits a price or falls below or rises above a trend line. If you have Pattern Recognition, an add-on feature that identifies bases, you can set alerts if a stock breaks out.
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